Netflix competing with cable giants now

Netflix Inc. (NFLX) signaled that it is ready to rumble with traditional pay-TV channels such as HBO and Showtime.

The Internet video company outbid Liberty Media Corp.'s (LINTA) Starz for the exclusive right to show Walt Disney Co. (DIS) movies about eight months after they hit theaters, establishing Netflix as a legitimate competitor to premium cable-TV channels by offering additional popular content for its Internet video streaming service.

Starting in 2016, Netflix customers will be able to see recently released Disney movies in their Watch Instantly queue. Currently those movies are available on Liberty Media's Starz, a cable channel that competes with HBO, Showtime and Epix.

Netflix and Disney declined to discuss financial terms of the three-year deal announced Tuesday, but it appears to be valued at around $300 million a year to Disney.

Starz's deal to show Disney's movies, which dates to 1993, is due to expire in 2015. During renewal negotiations, Disney sought terms that could have resulted in an increase of about $100 million annually, according to a person familiar with the negotiations.

For Disney, the income from the agreement will help offset some of the large sums it has paid in recent years for properties such as Lucasfilm Ltd., home to the "Star Wars" franchise. The deal includes Disney live-action and animated films, as well as those from Pixar Animation Studios and Marvel Studios.

Netflix shares jumped 14%, or $10.65, in Tuesday trading to $86.65, indicating that most investors aren't worried about its aggressive investments in high-profile movies and TV shows for its online streaming service.